“Bankruptcy Trouble in Paradise” is the lead story for the Money & Investing section of today’s Wall Street Journal (page B1; subscription required).

The Journal reports 874 Tanner & Haley members are impacted by the destination club’s bankruptcy filing earlier this week. The number is higher than the 750 members quoted on Tanner & Haley’s website and represents more than 20% of the estimated number of members industry-wide.

Tanner & Haley representatives continue to cite the “member-first” approach to reservations that resulted in expensive lease arrangements. We’ve recommended before that to ensure a viable model, destination clubs should lease no more than 30% of their homes (read Feb 15, 2006 post). In fact, most clubs we’ve interviewed cite lease rates of 0% to 20%.

Clearly, Tanner & Haley’s lease ratios were significantly higher. The court filing lists 67 homes as assets, far short of the “150 homes” or “331 luxurious homes” claimed on different pages on their website. Using Tanner & Haley’s stated 4.5 member-to-home ratio, we would expect a portfolio of 194 homes (874 members divided by 4.5).

Our research indicates most destination clubs have a member-to-home ratio closer to 6:1 and limit reservations to 30-45 days usage, depending on the membership plan. As we explain in our Decision Guide to Destination Clubs, the two figures together are the true measure of availability. We recommend an occupancy figure of no greater than 70% to provide time for maintenance and guest transition. Indeed, Tanner & Haley utilized an inversed model: low member-to-home ratio and virtually unlimited access.

Later this week, we’ll address some of the other key points covered in the Wall Street Journal’s feature story, such as the question of regulations and how destination clubs differ from timeshares.

See our recent coverage about the Tanner & Haley bankruptcy filing, including industry reactions from leading clubs and frequently asked questions.